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Markopolos - No one would listen: a true financial thriller

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    No one would listen: a true financial thriller
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Contents; Title; Copyright; Dedication; Foreword; Whos Who; Introduction; Chapter 1: A Red Wagon in a Field of Snow; Chapter 2: The Slot Machine That Kept Coming Up Cherries; Chapter 3: Falling Down the Rabbit Hole; Chapter 4: Finding More Peters (to Pay Paul); Chapter 5: The Goddess of Justice Wears a Blindfold; Chapter 6: Didnt Anyone Want a Pulitzer?; Chapter 7: More Red Flags Than the Soviet Union; Chapter 8: Closing the Biggest Barn Door in Wall Street History; Chapter 9: Soaring Like an Eagle Surrounded by Turkeys;Harry Markopolos and his team of financial sleuths discuss first-hand how they cracked the Madoff Ponzi scheme No One Would Listen is the thrilling story of how the Harry Markopolos, a little-known number cruncher from a Boston equity derivatives firm, and his investigative team uncovered Bernie Madoffs scam years before it made headlines, and how they desperately tried to warn the government, the industry, and the financial press. Page by page, Markopolos details his pursuit of the greatest financial criminal in history, and reveals the massive fraud, governmental incompetence, and criminal collusion that has changed thousands of lives forever-as well as the worlds financial system.-The only book to tell the story of Madoffs scam and the SECs failings by those who saw both first hand -Describes how Madoff was enabled by investors and fiduciaries alike -Discusses how the SEC missed the red flags raised by Markopolos Despite repeated written and verbal warnings to the SEC by Harry Markopolos, Bernie Madoff was allowed to continue his operations. No One Would Listen paints a vivid portrait of Markopolos and his determined team of financial sleuths, and what impact Madoffs scam will have on financial markets and regulation for decades to come.

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Table of Contents To all the victimsyou above all others deserve to know - photo 1
Table of Contents

To all the victimsyou above all others deserve to know the truth Foreword - photo 2
To all the victimsyou above all others deserve to know the truth.
Foreword
Harry Markopolos is a hero.
But not for anything he meant to do. He did not stop Bernie Madoff from creating the largest Ponzi scheme of all time; nor did he save Madoffs investors any money.
What he did do was create a clearly documented record of his warnings so that when Madoffs scheme eventually toppled under its own weight, the Securities and Exchange Commission (SEC), which was charged with stopping fraud and protecting investors, could not assume an ostrich defense.
Ponzi schemes exist in stable disequilibrium. This means that while they cant ultimately succeed, they can persist indefinitelyuntil they dont. Just the fact that something has gone on for a very long time doesnt mean its legitimate. Madoffs story shows that investors are attracted to too-good-to-be-true situations despite the red flags. How statistically different was Bernie Madoffs track record from General Electrics 100-quarter record of continual earnings growth or Ciscos 13-quarter record of beating analysts quarterly estimates by exactly one penny per share between 1998 and 2001? Madoffs record was clearly implausible and, therefore, raised the question of what was wrong. The question is: Do we draw the line at Ponzi schemes or do we do something about less clear-cut manipulations as well?
One time I pointed out to a Wall Street analyst that a certain company was cooking the books. The analyst responded that it made him more confident in his bullish recommendation because such a company would never disappoint Wall Street.
For years, I observed and experienced the SEC protecting large perpetrators of abuse at the expense of the investors whom the SEC is supposed to protect. The SEC has been very tough, and usually appropriately so, on small-time cons, promoters, insider traders, and, yes, hedge funds. But when it comes to large corporations and institutionalized Wall Street, the SEC uses kid gloves, imposes meaningless nondeterring fines, and emphasizes relatively unimportant things like record keeping rather than the substance of important thingslike investors being swindled.
Bernie Madoff epitomized the problem. When he was legit, Madoff was a large broker-dealer and the former chairman of NASDAQ. He was not famous as a money manager, let alone as a hedge fund manager, because he wasnt one. After his scheme collapsed and he became known as a crook, he was rechristened as a hedge fund operatoreven though, to this day, his was the only so-called hedge fund Ive heard of that didnt charge a management fee or an incentive fee. I doubt he would have fooled the SEC had he been known as a hedge fund manager, as the SEC wouldve been predisposed to catch him if they had known him with that title.
Warren Buffett said, You only find out who is swimming naked when the tide goes out. The financial crisis of 2008 revealed many, including Madoff, to be inappropriately attired. Effective regulation must mean that the skinny-dippers are stopped while the tide is still in.
As you will see, the SEC has taken some steps toward reform, and Harry Markopolos is optimistic that the agency will do better. Id hold off judgment until the SEC brings cases that matter against large corporations that havent gone bankrupt (taking action before the money is lost) and against institutionalized Wall Street.
The silver lining in the Madoff collapse, if there could be such a thing, is that for at least one moment in time, the SEC has been exposed. And for his role in making that happen, Harry Markopolos deserves all of our thanks.
DAVID EINHORN
December 2009
Whos Who
Investigation Team and Advisers
Frank Casey
Neil Chelo CFA, CAIA, FRM
Gaytri Kachroo, personal attorney
Harry Markopolos CFA, CFE
Phil Michael, qui tam (whistleblower) attorney
Michael Ocrant
Madoff and Advisers
Nicole DeBello, Madoffs attorney
Bernard Madoff, founder, Madoff Investment Securities LLC Ira Lee Sorkin, Madoffs attorney
Wall Street Feeder Funds
Access International Advisors and Marketers
Francois de Flaghac, marketing
Patrick Littaye, Founder
Prince Michel of Yugoslavia, marketing
Tim Ng, junior partner (and husband of Debbi Hootman)
Rene-Thierry Magon de la Villehuchet, Chief Executive Officer

Fairfield Greenwich Group
Douglas Reid, Managing Director
Amit Vijayvergiya, Chief Risk Officer
Financial Wizards and Wall Street Brains
Dan DiBartolomeo, Founder, Northfield Information Services
Jeff Fritz, Oxford Trading Associates
Leon Gross, Head of Equity Derivatives Research, CitiGroup
Andre Mehta, CFA, super-quant and Managing Director of Alternative Investments at Cambridge Associates
Chuck Werner, math wizard from MIT

Markopoloss Friends and Colleagues
Harry Bates, sergeant, Whitman, Massachusetts, Police Department
Pat Burns, Director of Communications, Taxpayers Against Fraud (whistleblower organization)
Boyd Cook, major general in the National Guard, Maryland dairy farmer
George Devoe, CFA, Chief Investment Officer, Rampart Investment Management Company
Elaine Drosos and family, owners of the Venus Cafe in Whitman, Massachusetts
Dave Fraley, managing partner, Rampart Investment Management Company
Scott Franzblau, Principal, Benchmark Plus
Bud Haslett, CFA, Chief Option Strategist, Miller Tabak Securities
Dave Henry, CFA, Chief Investment Officer, DKH Investments in Boston, Massachusetts
Chuck Hill, CFA, succeeded Markopolos as president of the Boston Security Analysts Society
Daniel E. Holland III, Managing Director, Goldman Sachs in Boston
Debbi Hootman, Darien Capital Management
Greg Hryb, CFA, Darien Capital Management
Louie Markopolos, Harrys younger brother
Matt Moran, Vice President of Marketing, Chicago Board Options Exchange
Peter Scannell, Putnam Investments Quincy employee who filed a claim with the Securities and Exchange Commission
Rudi Schadt, PhD, Director of Risk Management, Oppenheimer Funds
Diane Schulman, False Claims Act fraud investigator
Jeb White, President, Taxpayers Against Fraud
Burt Winnick, Managing Partner, McCarter & English in Boston
Bill Zucker, attorney, McCarter & English
Journalists
Erin Arvedlund, Barrons magazine reporter
Reuben Heyman-Kantor, 60 Minutes
Andy Court, 60 Minutes
John Front Page Wilke, Wall Street Journal reporter
Greg Zuckerman, Wall Street Journal reporter
Government Officials
Securities and Exchange Commission (SEC)
David Becker, General Counsel
Steve Cohen, attorney
Christopher Cox, former Chairman
David Fielder, Assistant Inspector General
Noelle Frangipane, Deputy Inspector General
Robert Khuzami, current Director of Enforcement
David Kotz, Inspector General
Lori Richards, former Director, Office of Compliance, Inspections and Examinations
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